how do swaps work?

[80655261]

can anyone tell me how the swap works? does it ever leave once it is imposed?

[Marco vd Heijden]

It's either positive or negative and happens overnight due to exchange rates.(except for crypto of course in that case it's just theft)

You can see it in the instrument specification by left clicking the instrument name.

[kypa]

Some brokers offer Islamist accounts without swap. You might pay higher spreads on those though.

[Alain Verleyen]

kypa:
Some brokers offer Islamist accounts without swap. You might pay higher spreads on those though.

Islamist ? You probably mean islamic.

[Anthony Garot]

Marco vd Heijden:

It's either positive or negative

Or negative and negative depending upon your broker and symbol.

For example, as of this posting, FxPros swaps for USDCAD are:

Swap Long: -1.74 Points

Swap Short: -5.13 Points

[Marco vd Heijden]

Yes i have seen that too but it kinda defies the logic behind closing and reopening the positions because how can both directions be negative?

[Samih Abdelli]

there is a fine article about swap in wikipedia,  if anyone is intrested

https://en.wikipedia.org/wiki/Swap_(finance)

[Alain Verleyen]

Marco vd Heijden:
Yes i have seen that too but it kinda defies the logic behind closing and reopening the positions because how can both directions be negative?

Because the broker takes his part. Such broker should probably be avoided.

[Wasim Zayed]

Basically the swaps are calculated from this formula

Swap = (Pip Value * Swap Rate * Number of Nights) / 10

But this is only for your reference, usually brokers add premium to this calculations according to the books.

[Marco vd Heijden]

Alain Verleyen:
Because the broker takes his part. Such broker should probably be avoided.

This is exactly what i was thinking and especially when you look at crypto because of course they will not close and reopen the position on the blockchain and so it's in plain sight that there is something wrong with this.

It look more or less like a mechanism of collecting or nibbling away customers capital on a daily basis.

[Wasim Zayed]

Marco vd Heijden:

This is exactly what i was thinking and especially when you look at crypto because of course they will not close and reopen the position on the blockchain and so it's in plain sight that there is something wrong with this.

It look more or less like a mechanism of collecting or nibbling away customers capital on a daily basis.

You missed the point from the swaps my friend, why do traders pay the swaps in first place ?

they pay it because traders borrowed the money ( the leverage money) from the broker to trade bigger amounts! If you traded 1:1 ratio and you kept the money in your pocket will not pay any swap.

and this borrowing action has to have a cost, this cost is the swaps... it has nothing to do with nibbling away customers capital.